Target Byers

He is under fire from all sides. So what is the truth about the Transport Secretary's handling of Railtrack? Can he survive?

On the day after the election last June Tony Blair phoned Stephen Byers at his home in the North-east to tell Mr Byers that he was making him Secretary of State for Transport. Sensing trouble, Mr Byers declared with understated ambiguity: "That's interesting".

His short reign has been more "interesting" than he could have possibly imagined or feared. By the end of last week one newspaper suggested "this man could not run a bath". Another implied that he had misled so many institutions that he was incapable of uttering a truthful word. Calls for his resignation screamed from the front pages.

Sensing blood, the new Conservative leader, Iain Duncan Smith, is playing one of the few aces in his hand, one an opposition leader rarely deploys. Next week the Conservatives are placing a motion of no confidence in Mr Byers ahead of a Commons debate. Not for the first time the media and the opposition are gunning for Mr Byers, a minister who once had the glowing reputation of being not only a highly competent Blairite but a possible successor to the Prime Minister himself.

The cruel twist for Mr Byers is that he had high hopes that his reputation would finally soar again this autumn. After all, he was a smooth Labour operator taking on Railtrack, a deeply unpopular privatised monopoly. Surely there could be only one victor in such a contest? An insider at Mr Byers' department says, with a certain amount of mischievous pleasure, that the minister had "an uncharacteristic spring in his stride" as he prepared to announce that Railtrack was being castrated. It would no longer be allowed to run the tracks and signals, the heart of the railway system.

The reason a potential triumph has become a potentially fatal disaster for Mr Byers sheds light on the Government across the board, raising questions about the dominance of the Treasury, the neurotic relationship between some ministers and the Chancellor, Gordon Brown, the competence of ministers and the preoccupation with spin that inadvertently became part of the Railtrack narrative. When Mr Byers settled into his desk at the Department for Transport, Local Government and the Regions, the future of Railtrack was not his main priority. Interviewed by this newspaper in July he emphatically ruled out the re-nationalisation of Railtrack without hinting at any alternative. Indeed Mr Byers said that what the railways needed above all else was a "period of stability".

All this changed on 25 July when Mr Byers met Railtrack's chairman, John Robinson, and its chief executive, Steve Marshall. They asked him for an extra £3.6bn. Senior officials in his department advised Mr Byers that the demand for further cash was "unacceptable". Mr Byers was said to be "astonished" by it.

What followed has been widely portrayed as a solo ministerial performance by Mr Byers. Early in August he appointed the department's independent financial advisers to review options for Railtrack. Towards the end of the month he contacted Ernst and Young, telling them to be on stand-by to move in as administrators. On 5 October Mr Byers told Mr Robinson that he was putting the company into administration. The following day he informed the Regulator, Tom Winsor that he would prevent him from bailing out Railtrack with an interim review.

Although speedy, this was a colossal exercise. It could not have been a solo performance from Mr Byers. The Treasury would have been involved from the beginning, when Railtrack came begging for more cash. Again the Treasury would have been consulted when Mr Winsor suggested a further delay and some additional cash for Railtrack as he conducted his "interim review". Mr Byers held a formal meeting with Mr Blair on 4 October, but the Prime Minister will have known what was happening well before then. In his party conference speech he hinted at what was to come when he described railway privatisation as a "disaster". Mr Byers was acting with the support of Messrs Blair and Brown.

So what has gone wrong and why is Mr Byers taking all the flak? In Downing Street and the Treasury there is a feeling that the current row is less about Railtrack and more about Mr Byers' decision to hang on to his adviser, Jo Moore. Ms Moore became famous for her memo written on September 11 urging colleagues to "bury" bad news. By failing to sack her Mr Byers has been vilified in the media as both arrogant and gripped by "spin". His friends insist he had other motives.

He knew it would be counter-productive from a presentational point of view but he did not want to terminate the career and income of a close and loyal colleague. Although he secured prime ministerial backing – Mr Blair shows a similar loyalty to his own private staff – Downing Street now regard this as the main error in the entire narrative. It was by no means the only one. Not for the first time a Blairite obsessed with presentation handled the media appallingly. Because of the row about Jo Moore, Mr Byers refused to give any interviews on Railtrack in the early stages of the row. His disappearance from view at a critical moment created a sense of a minister under siege. In his absence, Railtrack gained the initiative. The pressure on him increased when this newspaper revealed that Mr Byers' office made contacts with Railtrack on the afternoon of Spetember 11th. But the presentational error was compounded by Mr Byers's decision to go public with short interviews with selected broadcasters. Again he gave the impression he had more to hide than Ms Moore, who was nowhere to be seen.

Apart from that, Mr Byers or someone very close to him made one other error that infuriated his ministerial colleagues. The Railtrack story was leaked to the Financial Times. A Sunday newspaper also had most of the details in advance. The Treasury in particular was furious. On a smaller scale it compared the Railtrack initiative with the independence of the Bank of England when no one got a whiff of the story in advance. Some senior government insiders suspect that Mr Byers wanted to get the political credit in advance.

On the other hand Mr Byers has feared for some time that Mr Brown, wants to kill him off, removing another loyal Blairite from his line of fire. Possibly he was worried that Mr Brown would take the glory but as it turned out there was no glory to take. On the specifics of the policy, Mr Byers faces two questions. First, was he guilty of creating a false market in Railtrack shares? Clearly he allowed investors to continue buy them when there was a prospect they would become worthless. The other question relates to whether he misled the Commons last week when he told Theresa May, the Conservative transport spokesman, that he did not threaten the independence of Mr Winsor.

On these murky questions there are unlikely to be conclusive answers for some time, if ever. As they relate to the broader policy that he did not frame on his own, he has the full backing of Downing Street, the Treasury and Labour MPs, including the often critical chairwoman of the Transport Select Committee, Gwyneth Dunwoody. Indeed the comical irony of this story is that Mr Byers, the unexciting Blairite who saw himself as a competent manager, has become almost a hero for his reckless daring. One Blairite minister said yesterday "The important thing is that he has made the right decision. It's popular in the country. It's popular on the backbenches." The leftish MP, Martin Salter, confirms this: "This has made him popular. It is supported on the backbenches on the centre, to the left and to the right".

But Mr Byers has got himself in trouble too often to feel safe. As Secretary of State for Trade and Industry he notoriously failed to pick up the signs that BMW were planning to sell the Rover plant in Longbridge. That was a piece of cake compared to implementing the Railtrack policy. In the meantime the trains are not running on time and Ms Moore is still in place. As another minister observed "It's not Tony's style to bow to external pressure to get rid of a minister but nor is it his style to keep a discredited one in the longer term. And, let's be honest, a cabinet minister's job is not as safe as a spin doctor's."

Additional reporting by Jo Dillon